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Original Research
SAGE Open
January-March 2024: 1–14
ÓThe Author(s) 2024
DOI: 10.1177/21582440231224235
journals.sagepub.com/home/sgo
Influence of Board Governance
Characteristics on Sustainability
Accounting and Reporting in a
Developing Country: Evidence From
Nigeria Large Businesses
Isaac Monday Ikpor
1
, Otu Otu Akanu
1
, Joy Ugwu
1
,
Gabriel Obasi Chidozie Udu
2
, Fabian Udum Ulo
2
,
Nicholas Achilike
1
, Linus Adama
1
, and Bethel Oganezi
1
Abstract
Even though the determinants of sustainability reporting have been highly studied, the influence of Board Governance charac-
teristics on sustainability reporting has mainly remained understudied in Africa, especially Nigeria, despite the overwhelming
Business opportunities in the country. This study, therefore, investigates the influence of Board Governance on sustainability
accounting and reporting, drawing insights from large businesses listed in Nigerian stock exchanges. Using a sample of 167
reports drawn from three sources—annual reports, sustainability reports, and website over the period 2015 to 2020, this
study employs content analysis to quantify three layers of sustainability disclosure and fixed effects regression estimation
model to predict the influence of Board governance variables on sustainability reporting quality. Our results indicate that
Board governance characteristics such as Board capacity, board independence and Board Incentives are significant factors that
affect sustainability reporting quality. The results further suggest that although the number of directors on the board is posi-
tively associated with the quality of sustainability reporting, CEO duality is insignificant and has a negative association with the
quality of sustainability reporting. This study provides evidence that setting up long-term incentive-based compensation
affects sustainability reporting positively in developing countries, such as Nigeria.
Plain Language Summary
Influence of Board Governance on sustainability accounting and reporting in a developing country.
This paper investigates the influence of Board Governance characteristics on sustainability accounting and reporting in a
developing country using a sample of 167 reports drawn from three sources - annual reports, sustainability reports, and
website over the period 2015 to 2020. The study employs content analysis to quantify three layers of sustainability disclosure
and a fixed effects regression estimation model to predict the influence of Board governance variables on sustainability
reporting quality. Our results indicate that Board governance characteristics such as Board capacity, board independence and
Board Incentives are significant factors that affect sustainability reporting quality. The results further suggest that although the
number of directors on the board is positively associated with the quality of sustainability reporting, CEO duality is
insignificant and has a negative association with the quality of sustainability reporting. This study provides evidence that setting
up long-term incentive-based compensation affects sustainability reporting positively in developing countries, such as Nigeria.
1
Alex Ekwueme Federal University Ndufu Alike, Ebonyi State, Nigeria
2
Ebonyi State University, Abakaliki, Nigeria
Corresponding Author:
Isaac Monday Ikpor, Department of Accountancy, Alex Ekwueme Federal University Ndufu Alike, Ndufu-Alike Ikwo, Ebonyi State i010, Nigeria.
Email: Isaac.Monday@funai.edu.ng
Data Availability Statement included at the end of the article
Creative Commons CC BY: This article is distributed under the terms of the Creative Commons Attribution 4.0 License
(https://creativecommons.org/licenses/by/4.0/) which permits any use, reproduction and distribution of
the work without further permission provided the original work is attributed as specified on the SAGE and Open Access pages
(https://us.sagepub.com/en-us/nam/open-access-at-sage).
Keywords
Board Governance, sustainability reporting, incentives-based compensation, beyond financial statement, business perfor-
mance, stakeholder theory
Introduction
This paper critically assesses the influence of Board gov-
ernance characteristics on sustainability accounting and
reporting (SAR), which includes social, economic and
environmental reports. Although many studies have
addressed the determinants of sustainability accounting
and reporting using either internal firm characteristics
such as firm size, leverages, and listing age, other studies
have used external influences, for example, political,
legal, and regulations, as factors that affect corporate
voluntary disclosures(Anugerah et al., 2018). Aside from
these characteristics, other studies have used elements
such as corporate governance characteristics such as
board diversity and structure ( El-Deeb et al., 2022; El-
Deeb & Elsharkawy, 2019) as factors affecting the qual-
ity of voluntary disclosure; such studies are more in
developed countries than as it is in developing countries
such as Nigeria. While El-Deeb et al. (2022) studied the
impact of board characteristics on the disclosure of
forward-looking information in Egypt, such a study con-
centrated on forward-looking information rather than
specifically on sustainability reporting. Sustainability
reporting is one form of voluntary disclosure that needs
adequate attention in Nigeria. Even though Nigeria, a
developing country, has not progressed in voluntary dis-
closure of sustainability reporting in the past, Nigeria is
attracting international attention as the first country in
the world to adopt IFRS sustainability standards and
show ‘‘signs’’ of change in corporate practice. With these
efforts, studying factors that improve the quality of sus-
tainability reporting becomes necessary to enable the
country to position itself well after adopting the stan-
dards. Moreover, we have observed that the relationship
between corporate governance and sustainability report-
ing is also neglected despite the increasing awareness of
the importance of sustainability reporting in recent times
(Akhtaruddin et al., 2009; Dienes et al., 2016; Lozano,
2019; Marte et al., 2012).
Given the importance of sustainability reporting,
efforts have been made to improve firm transparency in
Nigeria, necessitating the Federal Government of
Nigeria to enact a Nigerian Code of Corporate
Governance Act of 2018 available for private and
public-owned firms. The code is aimed at institutionaliz-
ing best practices in corporate governance and creating
an environment for sustainable business operations, as
well as providing a framework to ensure good govern-
ance practices by articulating a broad set of principles on
corporate accountability and transparency for sustain-
able business practices. The Nigerian Corporate
Governance Code aims to achieve sustainable develop-
ment. Through sustainability reporting, firms contribute
to the global call for sustainability development in all
spheres of human endeavor, including accounting. A
robust Board governance structure is a factor that could
promote the quality of sustainability accounting and
reporting, given the importance of Board governance in
making an informed decision that could promote stake-
holder interest and performance (Alshehhi et al., 2018).
Following agency theory, there are two primary roles of
the Board: decision management, which includes initiat-
ing and carrying out choices, and decision control, which
includes approving and overseeing decisions (Fama &
Jensen, 1983). In line with the above assertion, board
governance is a critical factor that should be considered
viable for promoting voluntary disclosure, such as sus-
tainability reporting in developing countries (Vural,
2018). Earlier work demonstrates that businesses which
provide sustainability reports benefit from long-term
competitive advantages and stakeholder credibility
(Dobbs & van Staden, 2016). Investors would also profit
from prudent business decisions and successful risk man-
agement and be able to reward managers who operate in
a socially and environmentally responsible manner
(Noah, 2017).
Although sustainability reporting is becoming a more
crucial accounting reporting practice, developing nations
(like Nigeria) still have a limited understanding of sus-
tainability reporting (Daferighe et al., 2019; Haladu &
Bt. Salim, 2017; Nwobu & Adaeze, 2017) and the major-
ity of the companies do not report sustainability infor-
mation. Other recent studies that investigated this
concluded that additional study is needed in the area of
sustainability reporting and factors that affect sustain-
ability accounting and reporting (see, for example,
Daferighe et al., 2019; El-Deeb et al., 2022; Kumar et al.,
2015; Le et al., 2019; Nnamani et al., 2017). Using board
governance as a factor, this study critically assesses how
Board governance variables affect the quality of sustain-
ability accounting and reporting in Nigeria. Although
there has been some research in this area in both devel-
oped and developing countries, Nigeria is still lagging in
studies that examine Board governance effect on the
quality of sustainability reporting. This is the main issue
motivating this study. To the best of our knowledge, this
is the first study to have identified board governance as a
factor affecting sustainability accounting and reporting
2SAGE Open
in Nigeria. This study adds to the body of knowledge on
sustainability reporting by demonstrating that corporate
governance indices impact the quality of sustainability
accounting and reporting in Nigeria.
The remainder of the paper is organized as follows. A
brief assessment of the literature on the factors influen-
cing sustainability reporting is presented in Section 2.
That section also included the theoretical frameworks
that serve as the study’s direction, while methodology
and techniques for data analysis are covered in section 3.
Section 4 presents the results, while section 5 presents the
study’s conclusions and limitations.
Theoretical Framework of the Study
Stakeholder theory and legitimacy theory, propounded
by Freeman (1984) and Dowling and Pfeffer (1975),
respectively, are all linked to the institutional theory.
Prior applications of stakeholder and legitimacy theories
are extended to the examination of sustainability
accounting and reporting. To be accountable to stake-
holders and society at large, businesses have increased
the issuance of non-financial information and have pro-
vided additional reports above the minimum explaining
the impact of their activities on the environment and the
use of natural resources. The institutional theory is
related to the stakeholder and legitimacy theories put
out by Dowling and Pfeffer (1975) and Freeman (1984).
For us to examine sustainability accounting and report-
ing, previous applications of stakeholder and legitimacy
theories are expanded by concentrating on why busi-
nesses provide more disclosure than is required using
institutional theory. Businesses have increased the release
of non-financial information and have provided more
reports than the bare minimum outlining the effects of
their operations on the environment and using natural
resources to be more accountable to stakeholders and
society (Khan et al., 2013).
The theoretical framework utilized to investigate
external influences on sustainability accounting and
reporting by Nigerian businesses is the New Institutional
Sociology (NIS) lens. The literature on sustainable man-
agement and accounting has frequently employed NIS as
a theoretical lens (Christ et al., 2020; Glover et al., 2014).
NIS is the best because it provides a good lens for creat-
ing the context for management’s reaction to sustainabil-
ity reporting. NIS was first created by DiMaggio and
Powell in 1983. NIS seeks to explain why businesses in
particular environments adopt similar structures and
practices, which deviates from the standard management
reasoning that structural change should be ‘‘driven by
competition or by the need for efficiency’’ (DiMaggio &
Powell, 1983, p. 147). DiMaggio and Powell (1983), in
their landmark work, describe three kinds of pressure
that, in their view, would result in the homogeneity of
organizational and corporate activity. They refer to these
pressures and the homogenization process as being
isomorphic.
Accordingly, coercive, mimetic, and normative pres-
sures are the three sources of isomorphic pressure.
Coercive isomorphism concerns legitimacy and comes
from substantial stakeholders on whom a corporation or
organization depends. Although coercive pressure is also
used as a result of ‘‘cultural expectations in the society
within which organizations function’’ in the original arti-
cle, many studies operationalize this type of isomorphism
as having to do with the government and regulations
(DiMaggio & Powell, 1983, p. 150). Mimetic isomorph-
ism is the pressure induced by uncertainty that leads
companies to imitate other organizations similarly. This
is known as a ‘‘safety in numbers’’ strategy (Christ &
Burritt, 2019: 44).
The demands of professionalization from the educa-
tional system, professional networks, and economic con-
nections are called normative isomorphism (Christ &
Burritt, 2019). DiMaggio and Powell (1983) contend that
companies achieve greater legitimacy and are better able
to face conditions classified as uncertain, something
inherent in the grand challenge of voluntary reporting,
by responding to these sources of pressure and adapting
their activities accordingly (Brammer & Pavelin, 2019;
Christ & Burritt, 2019).
A lack of awareness of these mechanisms and how
they combine in global projects might lead to unexpected
costs and reporting challenges. Thus, institutional theory
provides a veritable lens for addressing management
responses to sustainability issues. Admittedly, in most
developing countries, practice is not currently based on
coercion from the government through legislation.
Nevertheless, for several reasons, the paper adopts a new
institutional theory to study the effect of Board govern-
ance on the sustainability reporting quality in Nigeria.
Literature Review
Determinants of Sustainability Reporting
Prior studies have investigated the factors that influence
sustainability reporting and accounting in industrialized
and developing nations (Akhtaruddin et al., 2009; Al-
Dhaimesh & Zobi, 2019; El-Deeb,2019; El-Deeb et al.,
2022). According to Cooke and Wallace (1990), the envi-
ronment impacts accounting. In this respect, numerous
studies have attempted to explain the technological and
environmental aspects that may have impacted the
growth of corporate disclosure in a country
(Raddebaugh & Gray, 2002). Studies have also shown
that social, economic, cultural, political, regulatory, and
trade-related factors impact how companies disclose
Ikpor et al. 3
information and how they account for it. Others have
pointed to technical advancements, including the inter-
net, mobile devices, and other types of computer soft-
ware (Xiao, 2006). Several of these characteristics were
combined in other studies to explain why disclosures
vary widely among companies. As seen in Figure 1, prior
researchers specifically discussed the connection between
variations in accounting systems and the reasons that
cause such variations on national and international
levels.
Depending on the researchers’ perspective, one compo-
nent of the factor that has recently gained attention is the
qualities of corporate governance (El-Deeb et al., 2022).
Corporate governance has been referred to as the way
companies are managed and directed. Corporate govern-
ance is intended to increase the accountability of businesses
to prevent significant failures brought on by conflicts of
interest or management tendencies toward opportunism
(El-Deeb & Elsharkawy, 2019). Corporate governance aids
in improving the calibre of financial reporting.
Earlier research connected low levels of financial
reporting with bad corporate governance practices.
Studies in developed regions have connected corporate
governance with businesses’ capacity to offer forward-
looking information (Aljifri & Hussainey, 2007). These
investigations frequently used fair value and forward-
looking information as dependent variables. The Board
of Directors acts as the control over all other controls in
corporate governance systems, which is why it is so
important. To encourage effective board governance, the
diversity of the Board is equally crucial. The material
that is currently available demonstrates that there are
two types of board diversity (see Kagzi & Guha, 2018).
These are demographic and structural diversity. Board
demographic diversity covers traits like board gender,
age, nationality or ethnicity, and educational variety,
whereas board structure diversity includes traits like
board size, CEO duality, and board independence.
According to the Corporate governance code, there are
twenty-eight broad sets of principles, of which sixteen
relate to board governance, structures, and diversity,
four to risk management, whistleblowing, and audit pro-
cedures, three to relationships with stakeholders, and
two to business ethics and fair treatment of stakeholders.
Two of the guiding principles focus on the disclosure of
information in a transparent manner and the adoption
of environmentally and socially responsible corporate
practices. A diversified board can assist businesses in
producing trustworthy and quality sustainability reports.
According to past studies, poor corporate governance
practices are also associated with weak internal control
systems, high levels of financial fraud and poor financial
reporting quality (El-Deeb et al., 2022).
According to agency theorists, the Board has two pri-
mary responsibilities: decision management, which
includes initiating and carrying out choices, and decision
control, which includes ratifying and overseeing decisions
(see Fama & Jensen, 1983; Shaukat & Trojanowski,
2017). The ability to initiate, implement, ratify, and mon-
itor reporting that gives stakeholders comprehensive
information about the performance of their businesses
are all aspects of effective board governance. This implies
that the Board is responsible for providing the three
components of quality sustainability accounting and
reporting. According to published research, the primary
goal of sustainability reporting is for businesses to
express their commitment to sustainable development
and to provide information on the outcomes of their
actions in the social, economic, and environmental
dimensions (Talebnia et al., 2013). The quality of sustain-
ability reporting is determined by a company’s internal
structure, according to several research strands (see, for
External factors:
Trade
Investment etc
Internal /domestic
factors:
demography,
geographic
Accounting system:
Mandatory and
Voluntary disclosure
Society &
culture
Institutions Accounting
regulations
Corporate
governance
Figure 1. Factors affecting sustainability accounting and reporting.
4SAGE Open
instance, Anugerah et al., 2018; Barako, 2007; Dienes
et al., 2016; Dissanayake et al., 2016).
Furthermore, profitability, capital structure, and busi-
ness age do not directly correlate with environmental
reporting ( Dienes et al., 2016). Similar findings were
made by Barako (2007), who discovered that internal
organizational characteristics such as firm size, profit-
ability, and leverage influence the level of environmental
information disclosure and had a negative correlation
with voluntary disclosure. Other research looked into
how outside variables, including politics and law,
impacted voluntary disclosure procedures.
Researchers have only recently begun to concentrate
on developing countries and the factors that affect cor-
porate environmental reporting and social reporting
(Dissanayake et al., 2016; El-Deeb et al., 2022; Jessop
et al., 2019; Okaro et al., 2018). Felix Erhinyoja (2019)
emphasizes that context-specific studies are needed
because the sustainability reporting SR factors and their
impacts are significantly different in poor nations com-
pared to rich countries. Other studies that looked into
this concluded that more needs to be done in the area of
sustainability reporting and the variables that affect how
much sustainability information is disclosed in other
developing nations (Daferighe et al., 2019; Kumar et al.,
2015; Le et al., 2019; Nnamani et al., 2017). According
to Dienes et al. (2016), the most significant determinants
of sustainability reporting in Germany are firm size,
media presence, and ownership structure. Corporate
governance only impacts the establishment of an audit
or sustainability committee. However, similar studies in
underdeveloped nations come to the opposite conclusion
(Dobbs & van Staden, 2016; El-Deeb et al., 2022; Yu &
Rowe, 2017). Accordingly, these studies show that cor-
porate governance aims to institutionalize best practices
in corporate governance and create an environment for
sustainable business operations. They also show that cor-
porate governance provides a framework to ensure good
governance practices by disclosing information beyond
financial, such as integrated reporting and other volun-
tary disclosure initiatives (El-Deeb, 2019). The results of
such studies are also mixed and contradictory depending
on the country. Developed countries have robust govern-
ance system which is propelled by ethicality. At the same
time, the same cannot be accurate for developing coun-
tries, especially in Nigeria, which has highly corrupt
practices (Transparency Index, 2021) and weak legal sys-
tems and institutional reforms.
Bearing that sustainability reporting is a voluntary dis-
closure matter, the question raised by Elsayed and Hoque
(2010) remains very cardinal. ‘‘Why do some firms dis-
close more information than other firms?’’ Similarly, Von
Alberti-Alhtaybat et al. (2012) also questioned from the
perspective of managerial theory—what keeps humans
accountable and what makes a person strive to do the
right thing. Drawing from the above analysis and prior lit-
erature, this study will make three postulations. First, we
expect that board capacity, board independence and
board incentives will affect the quality of sustainability
accounting and reporting in developing countries like
Nigeria. We will decompose board capacity into Board
size and the number of Board meetings, while board inde-
pendence is also decomposed into independent directors
and CEO duality.
Similarly, board incentives will include short-term and
long-term incentives for executive directors. Scholars
have used these metrics to measure the association
between corporate governance and sustainability disclo-
sure in Singapore. It is replicated in Nigeria since
Singapore and Nigeria are developing countries but have
different institutional mechanisms. For example, there
has been an effort by the Nigerian government to control
incessant corrupt practices by officers in public office,
culminating in the institutionalizing of different anti-
graft bodies (e.g. Economic and Financial Crime
Commission, corporate governance code and other simi-
lar legislation. The rate of corrupt practices in Nigeria
cannot be said to be the same in Singapore or any other
developing country. However, given the general weak-
ness in corporate institutional management in developing
countries, effective board management would enhance
the ability of firms to disclose sustainability information
to stakeholders. These three broad variables will be dis-
cussed in detail in the next section.
Board Capacity: Board Size and Board Meetings. Given that
coercive, mimetic, and normative pressures are the three
sources of isomorphic pressure that could affect the qual-
ity of sustainability reporting in any jurisdiction, Board
capacity is one of the essential factors. Weak Boards typi-
cally will be coerced through government legislation to
provide relevant information. On the other hand, some
Boards will ordinarily decide to incorporate good disclo-
sure practices because they have made it a culture.
The capacity of the Board can mitigate managerial
domination and reduce potential conflicts of interest (Hu
& Loh, 2018; Mak & Roush, 2000; Zahra & Pearce,
1989). Large board size is a veritable source of human
and social capital to firms because of the valuable exper-
tise they will bring, the pool of talent and resources, and
diverse knowledge of the company’s external environ-
ment (Certo, 2003), which can promote the quality of
sustainability disclosure. Furthermore, large board sizes
facilitate the intercompany imitation of strategies and
practices (Hu & Loh, 2018). Large board sizes are also
more likely to keep abreast with the latest sustainability
reporting trends in the company (Hu & Loh, 2018),
given that the directors may come from different
Ikpor et al. 5
backgrounds. Early studies on board size—sustainability
relationship indicate a positive relationship (Amran
et al., 2014; Mahmood et al., 2018; Wang, 2017).
Another aspect of the Board’s capacity is the fre-
quency of board meetings. The frequency of board meet-
ings reflects board activities and indicates the Board’s
time capacity. Hu and Loh (2018) suggest that the most
common problem that limits the effectiveness of the
Board is the need for more time to perform their activi-
ties/responsibilities as a board. Conger et al. (1998) pro-
vide that effective decision-making is a function of the
frequency of board meetings because it enables firms to
effectively discuss the firm’s sustainability issues and
engagement strategies, among other problems. Hu and
Loh (2018) also pointed out that the frequency of inter-
actions among board members through meetings would
help them to monitor better and address the needs of sta-
keholders, which would help them to secure legitimacy.
Based on the above, we expect a large board and fre-
quency of meetings to influence sustainability reporting
positively in Nigeria. Large boards may have those tech-
nically savvy in sustainability issues and those caring for
the environment that lay the golden egg. Hence, the
Board can mimic other foreign companies in producing
quality sustainability reporting. This leads us to the fol-
lowing two hypotheses regarding onboard capacity:
HIa: There is a positive association between board size
and sustainability reporting in Nigeria.
H1b: There is a positive association between the number
of meetings and sustainability reporting in Nigeria.
Board Independence: Independent Directors and CEO
Duality. Another factor that affects the choice of sustain-
ability accounting and reporting is the independence of
the Board of Directors. Available evidence shows that
board independence reduces agency costs by monitoring
management activities. Independent directors are more
vigilant in their monitoring capacity than non-
independence directors and less likely to tolerate man-
agerial opportunism at stakeholders’ expense (Kesner &
Johnson, 1990). Empirical evidence suggests that a
higher percentage of independent directors is expected to
drive positively the levels of accountability, transparency
and sustainability reporting. Firms with more indepen-
dent directors on the Board provide more comprehensive
financial disclosure (Lim et al., 2007).
Despite the importance of independent directors as a
driving force for more voluntary disclosure, CEO duality
(i.e., one person serves as both chairman and CEO of the
company) can affect board independence. The superior
governance power can undermine the Board’s effective-
ness and render the Board less effective in monitoring
and controlling functions, threatening the completeness
of information transfer and reducing voluntary disclo-
sure. Although empirical evidence on the effect of CEO
duality on voluntary disclosure is mixed, it is expected
that the separation of the office of CEO from that of the
chairman of the Board would enhance the completeness
of information transfer and sustainability reporting as
the two persons may provide a pool of talents, expertise
that would trigger the sustainability reporting positively.
Based on this, we hypotheses as follows:
H2a: There is a positive association between the propor-
tion of independent directors on the Board and sustain-
ability reporting in Nigeria.
H2b: There is a positive association between CEO dua-
lity and sustainability reporting in Nigeria.
Board Incentives: Short-Term and Long Term Incentives for
Directors. Strategies of director’s remuneration packages
are another factor that affects the quality of sustainability
accounting and reporting. The Board of Directors is an
essential part of the organization, so their remuneration
packages must be aligned with the stakeholder’s interests.
By their position, executive directors are responsible for
the day-to-day running of the business. Rewarding them
based on short-term performance without taking cogni-
zance of the long-term implications of their actions may
lead to short-termism (Hue & Loh, 2018). This will cause
damage to long-run value creation (Laverty, 1996). Since
sustainability reporting provides firms with long-term
strategies, the arrangement of incentives-based compensa-
tion could be an essential determinant of sustainability
reporting. Early empirical evidence supports this (Hu &
Loh, 2018). Based on this, we expect a positive association
between board incentives and sustainability accounting
and reporting quality. Following prior studies and the-
ories, we developed the following hypotheses:
H3a: There is a negative association between short-term
incentives and sustainability reporting in Nigeria.
H3b: There is a positive association between long-term
incentives and sustainability reporting in Nigeria.
Research Method
Sample and Data Collection
The sample of this study was composed of the top 50
firms listed on the Nigerian Stock Exchange (NSE) as of
31st December 2020. The selection of a firm is based on
the market capitalization of the firm. This study used
data downloaded from each firm’s reports (sustainability
reports, annual reports, and websites) extracted from
two primary sources: the Nigerian Stock Exchange web-
site, which serves as the mandatory repository for firms
listed in the stock exchange, and the second source the
6SAGE Open
GRI international sustainability website—Sustainability
Disclosure Database (SDD) for each year. In total, 167
reports were downloaded and analyzed (see Table 1).
The selected firms were drawn from different sectors fol-
lowing NSE classifications, as shown in Table 1. To be
considered for selection, a company must have either
published annual reports or accounts during the study
period that provide substantial support for sustainability
performance indicators or a standalone sustainability
report of either type (for example, sustainability reports,
corporate social responsibility reports, corporate social
responsibility progress reports, integrated reports, and
corporate environmental reports). Because laws mandate
them to provide annual reports, annual reports were used
(e.g., Company and Allied Matters Acts).
Dependent Variable. Sustainability reporting quality rep-
resents our dependent variable. We assessed each com-
pany’s annual and sustainability reports of each firm to
determine the quality of the reports. Prior literature pro-
vides that sustainability reporting has three pillars: environ-
mental, social, and economic. We evaluated and measured
each of these sustainability pillars according to the quantity
and quality of the information provided. Dissanayake et al.
state that there are 79 performance indicators in the GRI,
50 of which are recognized as essential indicators.
In contrast, we have taken out two in our study, leav-
ing a balance of 48. More than 40% of the annual
reports and accounts or sustainability reports of the
companies chosen do not have these two metrics. This
left us with 48 sustainability information items (Aspects)
employed in this study since they are important and per-
tinent to most stakeholders. There are 0 to 48 different
sustainability information items. Finding the sustainabil-
ity data in all the reports was simple by utilizing the
‘‘FIND’’ button. As a result, the sustainability quality
score is determined by dividing the amount of sustain-
ability information a company provides by the entire
amount of information intended to be disclosed. This
approach has been used by Ching et al. (2017) and
Akhtaruddin et al. (2009), respectively.
Independent Variables. The independent variables of
this study include board capacity, board independence
and board incentives. We have further decomposed these
three variables into (1) Board capacity measured by (i)
Board size, that is, number of directors on the Board
(NODOB), and (ii) Board meetings, that is, number of
board meetings held within the period (NOMH). (2)
Board independence is measured by (i) the number of
independent directors on the Board (IND) and (ii) CEO
duality (CEO). Moreover, the third independent variable
is board incentives, which are also decomposed into (i)
short-term incentives (STI) and (ii) long-term incentives
(LTI). As a general rule, we assigned the value of 1 if a
company discloses sustainability information in their
annual reports, sustainability reports, or websites.
Aside from the six independent variables listed above,
we have three other control variables. They are auditor
type (Audit), firm size measured by the logarithm of total
assets (logSize) and listing Age of firms (AGE). These
variables have frequently been used by prior scholars as
determinants of voluntary disclosures and are helpful as
control variables in this work.
Regression Model
In line with previous studies, we use the panel effect
regression model to examine the hypotheses regarding
the impact of board governance characteristics on sus-
tainability reporting quality in Nigeria. Sustainability
reporting quality (SR_Q) is the dependent variable, while
the independent variables consist of the various factors
affecting the choice of sustainability reporting. Based on
Table 1. Summary of Sample Selection and Distribution of
Sample Firms by Industry.
Panel A: Sample selection processes
Total number of firms listed on the NSX as
@ December 31, 2020
156
Less
Number of firms with incomplete records 5
Number of firms without annual
reports ending 31st December, 2020
15
Number of firms without sustainability
report ending 31st December, 2020
74
Number of firms without other website 12
Final sample 50
Panel B: Distribution of firms in the sample
by industry
Agriculture 4
Banking 6
Construction 5
Consumer goods 5
Health care 4
Industrial goods 5
Information and communication 4
Manufacturing 5
Natural resources 4
Oil and gas 4
Services 4
Total 50
Panel C: Total reports downloaded and analyzed
within the period
Number of companies with annual reports 85
Number of companies with sustainability reports 26
Number of companies with sustainability
information in the websites
56
Total reports downloaded and analyzed 167
Note. The numbers of firms selected were relatively equal to avoid any
selection bias which might distort the outcomes.
Ikpor et al. 7
previous studies, we introduce three other factors widely
reported as factors affecting firms’ voluntary disclosure
as control variables. These are Auditor type, Size, and
Listing age. The panel regression model allows for the
control of individual unobserved heterogeneity, given
that firms are studied across sectors and the heterogene-
ity of the firms. Drawing from previous studies (Babin &
Anderson, n.d.; Diamantopoulos & Winklhofer, 2001),
we specify the panel regression, which shows the rela-
tionship between the dependent variable and the various
measures of the exogenous variables as follows using the
general fixed effect model as shown in model 1;
Yit = bXit + ai+mit ð1Þ
Where Y is the dependent variable; a=(i=1.)isthe
unknown intercept for each entity (n entity specific inter-
cepts); bis the vector containing coefficients of indepen-
dent variables; X represents vectors of the independent
variables, mit is the error term; t is the time (year), i is
the company and j represents the industry. According to
Fifka (2012; Babin & Anderson, n.d.; Sharma et al.,
1978), this model allows for the control of individual
unobserved heterogeneity.
Expanding X to generate the baseline econometric
model, we have:
SR Qit = ai+b1NODOBit +b2NOMHit
+b3INDit +b4CEOit +b5STIit
+b6LTIit +mit
ð2Þ
We introduced the three control variables discussed ear-
lier to account for the three control variables used in the
work. These include the type of audit firm (AUDIT), size
of firms (SIZE), and listing age (AGE). Thus, this leads
to equation (3).
SR Qit = ai+b1NODOBit +b2NOMHit
+b3INDit +b4CEOit +b5STIit
+b6LTIit +b7AUDITit +bjSIZEj
+b8AGEit +mit
ð3Þ
To allow for the possible effect of the autoregressive
process on the stochastic term, a one-year lagged depen-
dent variable (SRQIt-1) is included in the equation and
then fitted into an autoregressive model where
SR Qit = ai+b1NODOBit +b2NOMHit
+b3INDit +b4CEOit +b5STIit
+b6LTIit +b7AUDITit +bjSIZEj
+b8AGEit +SRQit 1+mit
ð4Þ
Where SR_Q stand for sustainability reporting quality
NODOB is the number of directors on the Board
NOMH is the number of meetings held within the
periods
IND is the number of independent directors on the
Board
CEO is the CEO duality
STI is the short-term incentive packages
LTI is the long-term incentive package for directors
AUDIT represents the auditor type, and
SIZE represents the firm’s size, while Age is the listing
age of the firm.
Results and Discussion
Descriptive Analysis
The variables in the sample dataset are listed in Table 2,
along with their minimum, maximum, mean, and stan-
dard deviation. Our finding demonstrates that there are
apparent variations in the sample. The dummy variable
SRQ has a mean value of 0.65, which reflects that, on
average, 65% of the sampled companies report on sus-
tainability in various ways, including standalone reports,
annual reports, and websites. The outcome also shows
that the sample firms’ sustainability reporting increases
from 0.57 to a maximum of 0.84 with a standard devia-
tion of 0.069. This demonstrates how committed Nigerian
businesses are to informing stakeholders about sustain-
ability. The table also suggests that, on average, Nigerian
firms have approximately 7 (6.71) with a mean of 9.04.
Our result also suggests that the number of meetings firms
hold in Nigeria ranges from a minimum of 0 to 45, with a
mean of 0.032. The analysis also indicates that indepen-
dent director on the Board ranges from a minimum of 5
to a maximum of 9 Directors with a mean of about 7.02.
Results also show that the sampled firms held an aver-
age of 45 meetings per year (almost two monthly) and
Table 2. Descriptive Statistics.
NMinimum Maximum MSD
SRQ 167 0.57 0.84 0.65 0.069
NODOB 167 0.00 6.71 9.04 0.959
NOMH 167 0.00 45.00 0.32 0.000
IND 167 5.00 9.00 7.02 1.449
CEO 167 0.00 1.00 0.78 0.415
STIR 167 0.00 1.00 0.78 0.415
LTI 167 0.00 1.00 0.72 0.451
AUDIT 167 0.00 1.00 0.78 0.415
SIZE 167 0.00 4.71 3.64 0.960
AGE 167 11.00 34.00 73.08 6.160
Valid N (listwise) 167
8SAGE Open
that a significant proportion used short-term incentive
packages (STIR). In contrast, approximately 72% use
long-term incentive packages to motivate their directors.
We also observed that the average Age of the sample
firms stands at 73, while disclosure ranges from a mini-
mum of 11.0 to 34.0. Our statistics also indicate that Big
4 audit firms audit 78% of the samples (39 out of 50).
Correlation
We tested for the presence of multicollinearity using the
Pearson moment correlation test. Our result provides evi-
dence to conclude the absence of multicollinearity issues
among the independent variables in our regression model
(Table 3).
Empirical Results
As previously mentioned, the sample frame for this study
consists of businesses of all sizes and industries. The
issues caused by this degree of heterogeneity are resolved
using a panel estimate technique. In most panel estima-
tions, there is always a chance for both fixed effects (FE)
and random effects (RE), consistent with the results of
earlier studies. The Hausman test method is used to
address the problems that occur. To choose between FE
and random effect, apply the Hausman test. It examines
the relationship between the regressors and the unique
errors (ui). The instructions suggest that we utilize Fe if
the p-value is significant (i.e., less than .05), but if not,
we should use the random effect. The arising results of
the Hausman test are presented in Table 4.
The null hypothesis that the difference in the coeffi-
cients of the variables is not systematic is rejected with a
test result of 36.23 and an associated probability (p-value)
of .0062 (about .01), leading to the selection of the fixed
effect regression strategy. The fixed effect regression anal-
ysis findings are shown in the following Table 5.
The results from the fixed effects model demonstrate
that the quality of sustainability reporting in Nigeria is
significantly and favorably correlated with the number
of directors on the Board (NODOB). This result suggests
that companies with more directors on the Board have a
higher degree of sustainability reporting, consistent with
the descriptive results stated initially in Table 4 of this
paper. This result contradicts the findings of Isukul and
Chizea (2017) but is compatible with Hu and Loh’s
(2018) earlier. Hue and Loh (2018) found that the
Board’s capacity can mitigate managerial domination
and reduce potential conflicts of interest. Large board
size is associated with human and social capital that
would provide valuable expertise to the Board through
their pool of talent and resources and diverse knowledge
Table 3. Pearson Correlation Analysis.
Correlations
SRQ NODOB NOMH IND CEO STIR LTI AUDIT SIZE AGE
SRQ 1
NODOB .596** 1
NOMH .022*.025** 1........
IND 2.157*2.258*.000 1
CEO .375** .250*.000 2.100 1.
STIR .375*.250** .000 2.100 1.000 1.
LTI 2.066 .040*.000 .097** .632*.632*1.
AUDIT .375*.250*.000 2.100 1.000*1.000 .632** 1.
SIZE .596** .071 .000 2.258*.250** .250** .040*.250*1.
AGE 2.352*2.215 .000 2.423*2.031*2.031*2.151*2.031** 2.215*1
*Correlation is significant at the .01 level.
**Correlation is significant at the .05 level.
Table 4. Hausman Test.
Variables
Within group
(fixed effect)
(b)
Generalized
least square
(random effect)
(B)
Differences
(b-B)
NODOB 0.1938 0.3618 (0.168)
NOMH 5.7145 3.1672 2.547
IND 0.5081 0.5067 0.001
CEO 0.262 0.44 (0.178)
STIR 20.1545 0.126 0.029
LTI 0.044 0.014 0.030
AUDIT 0.6247 0.6295 (0.005)
SIZE 0.5591 0.4182 0.141
AGE 20.5448 20.5062 1.051
Chi-square (9) 36.23
Prob .x
2
0.0062
Note. H =x
2
(9) = (b-B)’[(V_b-v-B)^(21)](b-B), where H is a constant
vector; b and B are the Fe and Re parameter estimates, respectively.
Ikpor et al. 9
of the company’s external environment. This will pro-
mote the quality of sustainability reporting. Our results
also indicate that the number of board meetings
(NOMH) within the period is significantly positively
related to Nigeria’s sustainability reporting quality.
Consistent with stakeholder theory, Board performance
to safeguard the interest of shareholders is reflected in
the number of meetings where critical sustainability
issues are brought to attention. Regular meeting of the
Board drives directors’ efforts to report sustainability
matters. The frequency of board meetings reflects board
activities and indicates the Board’s time capacity. Earlier
work suggests that the most common problem that limits
the effectiveness of the Board is the need for more time
to perform their activities/responsibilities as a board.
The frequency of interactions among board members
through meetings would help them to monitor better and
address the needs of stakeholders, which would help
them to secure legitimacy.
The finding also indicates that independent directors
on the Board have a positive relationship with the qual-
ity of sustainability reporting, though insignificant. A
higher number of independent directors acts as a check
against management excesses and can bring issues of
lack or otherwise of sustainability matters to the table
for discussion. This would increase the quality of sustain-
ability reporting. The non-significance nature of the vari-
able shows that such is not characteristically a significant
factor affecting the quality of sustainability reporting in
Nigeria. The result is different from the prior study,
which found otherwise. In line with extant literature,
Board independence reduces agency costs by monitoring
management activities. Independent directors are more
vigilant in monitoring than non-independence directors
and less likely to tolerate managerial opportunism at the
stakeholder’s expense (Kesner & Johnson, 1990). Our
study supports that independent directors positively
drive Nigeria’s sustainability reporting quality.
Additionally, the results show that CEO duality,
short-term incentive plans, and long-term incentive plans
are statistically significant predictors of Nigeria’s sustain-
ability reporting quality. Board governance incentives
can be used to alter the regulations under which the
agent is required to act and reinstate the principal’s inter-
ests. The principal must get around the need for more
knowledge regarding the agent’s task performance by
hiring the agent to represent the principal’s interests.
Agents need incentives to behave in the principal’s best
interests. By taking into account the interests that drive
an agent’s behavior, agency theory can be used to create
these incentives effectively. Rules against moral hazard
must be in place, and incentives for bad behavior must
be eliminated. The strategies of director compensation
packages have an impact on reporting on sustainability.
The Board of directors play a crucial role in a busi-
ness, so their compensation packages must reflect the sta-
keholders’ interests. By their position, executive directors
are in charge of managing the company’s day-to-day
operations. Rewarding them for short-term achievement
without considering the long-term effects of their choices
could promote short-termism (Hue & Loh, 2018).
Results further show that firms with high total assets
engage more in actions that improve sustainability
reporting. In contrast, firms audited by Big 4 audit firms
provide higher sustainability information than others
audited by other firms. This means that auditor type has
a significant positive relationship with the quality of sus-
tainability reporting. It, therefore, means that firms
audited by Big-4 audit firms engage in activities that
improve the quality of sustainability accounting and
reporting. In line with the new institutional theory, the
uncertainty described by DiMaggio and Powell (1983)
can be related to the basis of sustainability reporting.
Sustainability reporting is mainly voluntary, meaning
organizations are free to form the structure and content
of their reports. However, with experienced auditors
from international backgrounds, firms would engage in
reporting above the minimum to satisfy the auditors
who properly have versed knowledge about sustainabil-
ity reporting and would want companies to do the need-
ful. Big 4 Audit firms have a reputation that they always
protect.
Our study also found that listing the Age of firms
affects the quality of sustainability reporting positively.
The finding also shows that firm size has a positive rela-
tionship with the quality of sustainability reporting. This
is because firms with higher assets are expected to be
Table 5. Panel Regressions.
Independent variables Pooled OLS Fixed effects
NODOB 2.1938** (0.024) 0.3618*(0.035)
NOMH 0.7145*(0.013) 20.167** (0.012)
IND 0.5081*(0.000) 20.5065*(0.103)
CEO 20.262*(0.076) 20.44** (0.085)
STIR 24.154** (0.065) 20.126*(0.030)
LTI 0.044*** (0.004) 0.014*(00.255)
AUDIT 0.062** (0.015) 0.629** (0.425)
SIZE 0.056** (0.012) 0.418*(0.039)
AGE 3.041** (0.015) 0.5062*(0.000)
N 167 167
R
2
Within 0.076 0.321
Between 0.52 0.142
_Constant 65.34 43.51
F-test/Wald x
2
3.62 5.27
Prob .F/Prob .x
2
0.0017 0.0000
Note. Probability values in parentheses.
*p\.1. **p\.05. ***p\.01.
10 SAGE Open
buoyant enough to provide additional disclosure (sus-
tainability reporting) above the minimum. Research
related to company size and sustainability reporting
refers to the theory of legitimacy, which states that larger
companies receive more public scrutiny, requiring more
legitimacy and higher resources. The stakeholders of
more prominent companies follow all company activi-
ties. The bigger the companies, the more they will dis-
close high-quality sustainability information.
Similarly, we used Table 6 to estimate the results of
the system-GMM based on our equations (3) and (4).
We treated some variables as partly endogenous in all the
functions and system-GMM estimations. This aligns with
our theory that some form of causality exists between
these factors and the dependent variable.
Table 6 shows the system–GMM estimation results.
The correlation results (1 and 2) the first and second-
order autocorrelations of residuals are asymptotically
distributed, while our test for heteroskedasticity consis-
tent asymptotic robust standard errors is given in par-
entheses. Wald 1 and 2 are Wald tests for the joint
significance of estimated coefficients, asymptotically dis-
tributed as x
2
(df) under the null of no relationship. At
the same time, Wald 2 is a Wald test for the joint signifi-
cance of the time dummies also distributed as x
2
(df)
under the null of no relationship, excluding the first year
(2015) and the last year (2020) which are dropped due to
collinearity problems. Our Sargans test for both the sys-
tem GMM (SYS_GMM) and the differenced
GMM(DIF-GMM) is a test of over identifying restric-
tions asymptotically distributed as x
2
(df) under the null
instrument’s validity.
We applied the two steps version of the system GMM
techniques developed by Blundell and Bond (1998) which
is found to have the capacity to control for the correla-
tion of errors over time, heteroskedasticity across firms,
simultaneity and measurement errors due to the utiliza-
tion of orthogonal conditions on the variance-covariance
matrix (Anthoniou et al., 2008). More specifically, our
choice of the system GMM is motivated by three consid-
erations. (1) the nature of our data set (more diminutive
size of T= 5, Relative to a larger size of N= 167). (2)
The possibility of the variance of the time-invariant
unobservable firm-specific effects increasing relative to
the variance of the serially uncorrelated time-varying dis-
turbance terms and (3) the likelihood of the autoregres-
sive parameter or the adjustment speed approaching
unity. Blundell and Bond established that the system-
GMM estimator becomes more helpful in reducing the
finite–sample biases associated with the differenced
GMM-estimator. Our results for the various tests are
shown in Table 6.
Overall, the model’s variables are all significant and
successfully predict roughly 76% of the changes in the
dependent variable. A large f-value, or greater than the
F-critical value, generally denotes the variable’s overall
significance. The F-test typically evaluates the regression
model’s overall fit and contrasts the combined effects of
all the variables. As the overall f-test is significant, we
can deduce that the R-square does not equal zero and
that there is a statistically significant correlation between
the model and the dependent variable.
Conclusion
The main goal of sustainability reporting is for businesses
to express their commitment to sustainable development
and to provide information on how their actions have
affected social, economic, and environmental perfor-
mance. This paper, therefore, has investigated factors that
drive the choice of sustainability accounting and reporting
as a business strategy by drawing insight from large busi-
nesses listed in Nigeria stock exchanges using descriptive
statistics and fixed effects regression estimation model.
Our study finds new evidence that Board governance
characteristics are significant factors affecting Nigeria’s
sustainability reporting quality. The results suggest that
although the number of directors on the Board is posi-
tively associated with the quality of sustainability report-
ing, CEO duality is insignificant and negatively associated
with the quality of sustainability reporting in Nigeria. We
observed that the number of meetings held by directors
Table 6. System GMM Estimation Results.
Independent variables Model I Model II
NODOB 2.1938** (0.024)*0.3618*(0.035)**
NOMH 0.7145 (0.013) 20.167 (0.012)
IND 0.5081 (0.000) 20.5065 (0.103)
CEO 20.262 (0.076) 20.44** (0.085)
STIR 24.154** (0.065) 20.126 (0.030)
LTI 0.044*** (0.004) 0.014*(00.255)
AUDIT 0.629** (0.425)
SIZE 0.418*(0.039)
AGE
AR(1) 0.1696 (0.006) 0.1765 (0.000)
AR(2) 0.469(0.065) 0.481(0.343)
Wald 1(df) 22.69(6) 28.56(9)
Wald 2(df) 11.35(8) 14.28(8)
Sargan (SYS_GMM) 149.81 (0.643) 178.24 (0.721)
_Constant 65.34 43.51
Sargan (DIF_GMM) 3.62 5.27
Observations 167 167
Note. AR(1) and AR(2) represent the first and second order
autocorrelations of residuals. Model I is the system GMM results when
the three c control variables are excluded while model II represents
results when the control variables are included.
*,**, and *** indicate that coefficients are significant at 10, 5, and 1%
levels respectively.
Ikpor et al. 11
and listing age significantly affect the quality of sustain-
ability reporting; firm size, however, is significant but
exhibits a negative association. The study also finds that
setting up incentive-based compensation for board direc-
tors affects sustainability reporting positively for long-
term incentives and negatively for short-term incentives.
Our findings support long-term incentive packages for
directors rather than short-term incentives. This study
adds more proof to the knowledge that effective board
governance influences the choice of sustainable account-
ing and reporting in a developing country.
This study offers three contributions. First, it adds a
comprehensive analysis of the factors influencing sustain-
ability reporting in Nigeria to the literature on sustainabil-
ity reporting in emerging economies, particularly Nigeria.
The study also expands and updates the findings from ear-
lier research, contextualizing them in a developing econ-
omy. By doing this, this paper, unlike most earlier studies
that focused on established markets, offers new evidence
on the sustainability issue in the context of developing
economies. Our study, therefore, supports the request for
additional context-specific research in poor nations (Ali
et al., 2017; Duran & Rodrigo, 2018). Finally, the results
add to the body of literature used to promote expanding
our knowledge on the subject by offering more proof of
the importance of particular factors.
This study’s main flaw is that it only includes data
from one country, Nigeria, and a limited sample of busi-
nesses, which could make generalization difficult. Based
on those mentioned above, future researchers should
assess sustainability across regions by including more
countries or changing the basis to a regional one. Our
study demonstrates that the effectiveness of sustainabil-
ity accounting and reporting in Nigeria is influenced by
the Board’s capability, independence, and incentives.
Therefore, the government should focus more on provid-
ing incentives for companies that provide extensive sus-
tainability reporting to encourage management to pay
attention to the issue of sustainability reporting.
Declaration of Conflicting Interests
The author(s) declared no potential conflicts of interest with
respect to the research, authorship, and/or publication of this
article.
Funding
The author(s) received no financial support for the research,
authorship, and/or publication of this article.
ORCID iDs
Isaac Monday Ikpor https://orcid.org/0000-0002-4175-578X
Bethel Oganezi https://orcid.org/0000-0002-7312-4683
Supplemental Material
Supplemental material for this article is available online.
Data Availability Statement
The data that support the findings of this study are available on
request from the corresponding author.
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